Monday, March 04, 2013

A national chain of branded IVF clinics in India

Many venture capitalists ( VCs) are interested in investing in the Indian healthcare space. It has become a hot area now, because there is no much inefficiency; and because it promises so much scope for growth. IVF especially is a very exciting market , given the fact that it's so underdeveloped , and there is so much potential for scaling up – not just to meet the needs of Indian infertile couples , but also because of reproductive tourism .

This is why venture capitalists have invested quite a bit of money recently in entering the Indian IVF market, but most of these ventures have fallen flat on their face. They want to rapidly setup a pan – India network of IVF clinics, in order to make the most of the first mover advantage and capture the space ! While it’s true that the opportunity is huge, just throwing money at the problem does not help. The key question is – What makes an IVF clinic successful ? While you can fool some of the people some of the time, if the clinic does not achieve a high pregnancy rate quickly, it is doomed to fail.

There are two things which need to be emphasized. IVF is a very hands-on treatment – it is not something which can be delegated or outsourced to someone else . Successful IVF clinics are run by a person who is extremely anal-retentive - someone who's obsessed with attention to detail . If you want to run a chain of clinics, you then need to design and implement systems and processes which are replicated identically across all the clinics, so that all the centers have equally good success rates. The biggest problem today is the large amount of variability within IVF clinics , so that even within one city, one center will do well , while another will flop, even though they seem to be following exactly the same processes ! This can be extremely hard to understand - and very frustrating for the doctor as well. WE still do not know what causes this kind of variability ! If we do not understand this, how we implement quality control systems to make sure that that doesn't become a problem ?

This attention to detail means that the IVF doctor needs to be do IVF as a full-time practice. It's not possible to have a gynecologist who does IVF on a part-time basis , and will also do some hysterectomies and endoscopies side-by-side , in order to maximize his income. This is why it needs a full-time dedicated doctor to head the IVF center.

While starting a chain of IVF clinics does not need deep pockets ( it’s not very expensive to set up an IVF unit, and the return on investment is phenomenal !), the VC needs to have patient money – it needs someone who will understand that it takes time to successfully replicate the model across geographies.

The danger is that VCs are so focused on growing the topline and the bottom line, that they are in a huge hurry so set up a large number of centers very quickly . This is easy to do , because it doesn't cost much money to start an IVF clinic, but if the centers don't have well-defined systems and processes , they will not achieve a pregnancy. This will end up damaging the reputation of the entire chain. The good news is that smart VCs are willing to learn from the mistakes of the “first movers” !

This is a great time to setup a national IVF chain . There are lots of advantages to having centralized operations , because this gives you economies of scale ; and marketing and branding can be controlled centrally. A high quality brand , built patiently over time, will inspire confidence in patients , who would rather go to a clinic which provides high tech, high quality care. Most IVF clinics today are run by doctors in solo practice – and their results often leave a lot to be desired.

Equally importantly, the IVF chain cannot afford to be personality dependent – it should not be run by a single doctor. It should be doctor independent, because it’s not possible to have a single doctor run around and try to trouble shoot of fire-fight when problems arise ( as they inevitably will !)

The key is to have a central head of quality control, whose full time job is to monitor each center closely, to ensure that they are all doing the same thing, each time. The problem with IVF doctors is that they tend to have large egos.. They think they know all the answers, and refuse to change their set ways. They always want to tweak protocols, to improve their success rates. This is a recipe for disaster ! The flagship center needs to provide training, so that each center will be a clone of each other, even though the doctors are different. Only a strong head of quality control can do this – and he will need to police each center on an ongoing basis, to prevent any variation. This is an expensive proposition , which means you need to overinvest in technology , people and equipment in the first center, but it’s only when you do this that you can be sure your fifth center will be identical to the second ! Trying to cheat will end up harming the replicability – and once one center has poor pregnancy rates, this will damage the reputation of the entire chain. Once the brand image takes a beating, it's extremely hard to repair this.

The bottom line is – it’s possible to set up a chain of IVF clinics in India, but an IVF clinic is not an eyecare clinic or a pathology lab. Cataract surgery is very cut and dried , which makes it very reproducible. However, doing IVF treatment is slightly different, and we cannot use a cookie cutter model when setting up an IVF chain. There is still quite a bit of magic sauce in IVF treatment, which means it requires a lot more supervision and handholding to be able to carry out successfully.

The other danger is that in the pursuit of numbers and profits, each center will try do too many cycles. The optimal number of IVF cycles a clinic should do is about 1000 cycles per year. This makes it busy and profitable – but still manageable enough , so that the care remains personalized.

Creating a national IVF brand is both a challenge and an opportunity. Anyone who is willing to do it properly is likely to reap rich rewards ! He will also be able to create a model which will be hard for anyone else to replicate.